By JOHN COOK, P-I REPORTER

Published 10:00 pm, Thursday, October 12, 2006

Google's big bet on YouTube this week gave hope to determined entrepreneurs everywhere that their unprofitable Internet ventures might one day turn into modern-day gold mines. And it caused some alarm that we have returned to an era in which companies are valued -- once again -- on "eyeballs" rather than revenues.

But the hefty price tag for the San Bruno, Calif.-based company got me wondering what Seattle's best-known Web 2.0 startup, Zillow.com, could fetch if it were to head down the acquisition path.

On the surface, the two Internet darlings may appear quite different, with YouTube specializing in online video and Zillow serving as an online repository for residential real estate information.

But there actually are quite a few similarities. Both are online media companies that are hoping to capitalize on the shift of advertising dollars to the Web. Both allow consumers to search for information that was previously difficult or impossible to attain (real estate records and personal videos). And both have quickly grown through word of mouth.

So, based on the $1.65 billion that YouTube just received, how much would someone fork over for Zillow?

That, of course, is difficult to gauge. And it is entirely dependent on the individual suitor.

But let's take a look at some of the numbers. First off, toss revenues and earnings out the door -- they are minimal or non-existent at both companies. That means we need to focus on that scary metric from the last dot-com boom: "eyeballs."

YouTube -- whose worldwide Web audience is growing by more than 10 percent each month -- attracted a whopping 72 million unique visitors in August. That means its sale price to Google was 23 times the number of people who visited the site.

Zillow is one of the most popular online real estate sites, but its audience is not growing at nearly the pace of YouTube. And overall unique visitors to Zillow, which comScore listed at 2.3 million for August, pale in comparison to the video site. (Zillow's internal numbers for August were 3.7 million.)

Now, let's say a suitor wanted to buy Zillow and it looked to the Google-YouTube deal for guidance. At 23 times monthly visitors, one would value Zillow at just $53 million.

That's less than the $57 million in venture capital that the company has raised.

Based on recent acquisitions of Internet companies -- including the $580 million that Fox Interactive Media paid for MySpace and the $66 million that Reader's Digest paid for AllRecipes -- the Zillow valuation actually might be high.

Pete Spear, an associate at Cascadia Capital, a Seattle investment bank, said that Seattle-based AllRecipes sold for 11 times its monthly unique visitors. Fox Interactive, a unit of News Corp., got an even better deal for MySpace. It paid just 7.3 times the company's unique visitors.

Of course, the number of people visiting a Web site is just one way to value a money-losing company.

A startup could have a cutting-edge technology, a substantial lead over competitors or a desirable user base.

Amy Bohutinsky, a Zillow spokeswoman, notes that 86 percent of the company's visitors own homes. And more than half are in the process of buying, selling or remodeling a home.

YouTube may have youth on its side, but Zillow is capturing people at the point of one of life's largest monetary transactions.

"It is a high-value group of users, who are not just looking to buy or sell, but maybe refinance or do home improvements" Bohutinsky said. "They are pretty valuable to advertisers."

"I am going to say that you can extract fewer dollars per unique visitor on YouTube than you can on somebody who is about to buy a house, get a mortgage, move all of their belongings," he said. "So the value per user at a company like Zillow ought to be higher."

However, Spear noted that YouTube -- with its younger audience -- could achieve more success over the long run because the advertisements are presented inside videos.

"That is much more valuable because people are watching that versus having just a contextual link or a banner ad," he said.

YouTube has a couple of other distinct advantages. It is truly a global phenomenon, with an audience that stretches from Tokyo to Tulsa. At this time, Zillow is limited to the U.S. Furthermore, YouTube served 3 billion video streams in July. That compares to just 26 million homes viewed on Zillow.

Interestingly, Zillow is bigger than YouTube in some ways. It employs about twice as many people and it has raised five times as much venture capital.